Growth leads to investment in the Caribbean

Latin Trade, May, 2004

Investment in the countries of the Caribbean is expected to increase as the Caribbean Development Bank (CDB) predicts continued growth over the next year in the economies of the region. CDB President Professor Compton Bourne said earlier this year that the positive economic growth experienced in 2003 was influenced by a favorable global climate, increased public spending in the United States and a return in business and consumer confidence.

Tourism provided the biggest boost last year to regional economies, whose governments are moving toward various public/private initiatives to diversify their success to other sectors. These include information technology, manufacturing and agriculture. Tourism for the region is expected to post even greater gains in 2004 and 2005, according to Therese Feng, an analyst with global credit ratings group FitchRatings. "The general trend toward increased tourism in the Caribbean should result in the posting of more solid gains for virtually all of the economies in the region," she said.

Feng, who specializes in the Caribbean, added that the region is emerging strongly from the affects of the global economic downturn and is expected to gather momentum in creditworthiness.

Caribbean governments' efforts to encourage investment in various initiatives will likely be assisted by the creation of the Caribbean Single Market Economy (CSME). Set to come into effect by the end of this year, CSME aims to position Caribbean countries positively to take advantage of global trade trends.

The CSME, which was conceived as an instrument to facilitate economic development of member states in an increasingly liberalized and globalized environment, will form a single market across the 15 Caribbean Community (CARICOM) countries. The goal for the newly created market is for it to operate without barriers and under a common regime in terms of the movement of goods and capital.

CSME is widely expected to build on the success of CARICOM, which has been negotiating the interests of the Caribbean's 15 million strong population internationally for the past 30 years.

CARICOM most recently signed a trade agreement with Costa Rica that will open the door for the free flow of goods to nearly 20 million consumers.

Jamaican Prime Minister P.J. Patterson and Costa Rican President Abel Pacheco signed the pact in Kingston, Jamaica earlier this year after nearly 20 months of negotiation.

Under the agreement, 90% of goods will receive immediate duty free access to markets, while tariffs on other products will be reduced gradually.

The agreement will help the countries collaborate in future trade talks as they move closer to participation in the Free Trade Area of the Americas, according to Patterson.

Two-way trade between the Caribbean Community and Central America reached US$285 million in 2002, according to government statistics.

In recent years, countries in the Caribbean Rim have also made significant steps towards liberalization and regulatory reform by recognizing the benefits of foreign direct investment and the importance of creating a favorable environment for private investors.

Some of these initiatives include the granting of national treatment to foreign direct investors in an increased number of industries and the elimination of most restrictions on capital and profit remittances. Beneficial tax treatment is another means by which Caribbean governments are now attracting a larger number of private investors.